Colors and More is considering replacing the equipment it uses to produce crayons. The equipment would cost $1.37 million, have a 12-year life, and lower manufacturing costs by an estimated $304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. What is the net income from this proposed project?

Question

Quizplus · Accepted Answer

Net income = [$304,000 - ($1,370,000/12)] F1F1F1S1F1F1F10 [1 - 0.35] = $123,391.67

Colors and More Is Considering Replacing the Equipment It Uses